Courtney Saaf

It’s been a couple of months since my last update, and miraculously, the markets are not far off from the highs of early 2025. Secured Retirement’s Market Forecast updates are part of our ongoing market monitoring and an element of our due diligence to our clients. We’re happy to report that the tariff turmoil of April has largely settled and there are some positives to note – namely, the framework agreement on trade between the U.S. and China. While the terms are limited to six months, it’s a step forward. China is also set to resume their shipments of rare earth materials and magnets.

Gross Domestic Product (GDP)

In Q1, we noted that negative GDP numbers were driven by trade imbalances. When you remove government purchases, inventories, and international trade, the data would have been positive. Call it extraordinary circumstances with the massive shift in trade policy.   

In Q2, we’re not booming, even though previous models (like those from the Atlanta Federal Reserve) were tracking above long-term averages. After the June Federal Open Market Committee meeting, caution on future growth is warranted, especially when considering their Summary of Economic Projections downgraded 2025 growth from 1.7% to 1.4%. On the bright side, net federal tariff revenue is almost double the year-to-date amount from last year.

Consumer Confidence

Consumer sentiment jumped to 60.5 in June, up from 52.2 in May. For now, future price increases are not a major concern. The M2 money supply, a measure of the total amount of cash and other liquid assets in the economy, has remained flat since 2022, and overall spending has remained level. Should consumers pay slightly more for certain goods, those costs do even out in other areas. The labor market continues to provide strong support.

Inflation

Personal Consumption Expenditures (PCE) came in at 2.1% in April, right in line with the Fed’s target. The annual estimate, excluding food and energy, has been raised to 3.1%. It remains unclear how much of the tariff burden will be absorbed by foreign producers versus passed on to consumers. So far, import prices are up 0.8% for the year, but there is not yet an indication of how far they will go. With a decline in the trade-weighted dollar, foreign producers are earning less in their own currencies – another factor to watch.

Outlook for Rate Cuts

The Fed maintained its target range for the federal funds rate. Depending on the source, projections still suggest two rate cuts in 2025, and only one in 2026. The number of committee members leaning toward no easing has increased since spring.

Looking Ahead

While markets have held relatively steady, ongoing shifts in trade policy, inflation dynamics, and Fed decisions will continue to shape the second half of 2025. As always, we’re keeping a close eye on the data and helping clients stay focused on long-term goals. If you have questions about how these developments may affect your own plan, I’m here to help. Give us a call: 952-460-3290.

It goes without saying that the market is constantly fluctuating but changing trade policies and shifting economic data are fueling increased uncertainty. History shows that markets have weathered similar storms before – and even come out stronger. In this update, we break down the latest trade impacts, employment data, inflation trends, and what they all mean for your financial future.

Market Volatility Amid Tariff Uncertainty

Markets took a hit earlier this month as President Donald Trump’s tariffs went into effect – only to be delayed once again. This ongoing uncertainty has led to what’s been called a “tariff tantrum,” reminiscent of the “taper tantrum” in 2013, when markets panicked over the Federal Reserve’s decision to slow quantitative easing. But here’s what you should know: The S&P 500 has gained 4,000 points since 2013. Simply put, markets dislike change, and the past two years have been spectacular with little volatility. We’re now experiencing a correction as investors process trade developments in real time.

Trade Impact on GDP and Key Industries

Exports account for roughly 10% of American Gross Domestic Product (GDP), and recent shifts in trade policy have made a noticeable impact. A rush of imports in December altered the trade balance, contributing to a weaker GDP forecast for the first quarter. Industries such as agriculture and automotive could be hit hardest by tariffs. Too this month, markets reacted over the threat of 50% tariffs on Canadian steel and aluminum – double the previous 25% rate. While this increase didn’t materialize, the uncertainty surrounding trade policy creates volatility. Beyond targeting individual sectors there is heavy retaliation to tariffs imposed by would be trading partners.

Employment Data and Interest Rate Outlook

The latest jobs data also signals potential headwinds. The ADP report showed that only 77,000 new jobs were added in February, significantly below the expected 162,000. The non-farms payroll report was better but still missed the forecast. And unemployment ticked up slightly to 4.1%.

These jobs numbers, weaker GDP,  inflation, and weak consumer sentiment, have led to calls for three to four rate cuts this year instead of one to two. However, once the tariff situation stabilizes and markets regain their footing, the Fed is likely to refocus on inflation and maintain a measured approach to rate cuts. At the Federal Open Market Committee meeting the number of members who believe more than two cuts would be appropriate fell while the number of members who think less than two cuts are appropriate doubled.

Inflation Trends and Consumer Confidence

Inflation data offers a mixed picture. February’s Consumer Price Index (CPI) showed only a small increase, and over the past 12 months, the CPI has cooled from 3% to 2.8%. Meanwhile, the core inflation reading declined from 3.3% to 3.1%, the lowest since April 2021. While inflation remains elevated, it’s moving in the right direction toward the Fed’s 2% target for now, not knowing how much tariffs will affect companies and the consumer.

Consumer confidence and labor shortages will be key factors to watch in the coming months. Modest improvements in government efficiency, declining interest rates, and lower energy costs will (hopefully) help markets perform better.

Staying the Course in Uncertain Times

With a lack of extended volatility over the last couple of years, a downturn now isn’t completely unexpected. The important thing is to remain patient and ask yourself, “Will markets be lower two or three years from now?” Staying focused on long-term goals and avoiding reactionary decisions will be critical in navigating the current market. If you have questions on your portfolio, don’t hesitate to reach out: 952-460-3290.